Parents returning to work will have between 10 and 20 per cent of tax sliced off picking up an extra day of work under Labor's $4 billion childcare policy, indepedent modelling shows, delivering the largest tax windfall to primary carers in a generation.
New analysis from the Australian National University shows that most primary carers, who are mostly mothers, would be better off under Labor's $4 billion policy to subsidise between 85 and 100 per cent of childcare costs. However, the research found some families with combined incomes over $174,000 would be better off under the Coalition's income tax plans.
Families with two incomes of $50,000 a year full time would keep an extra 18c out of every extra dollar earned by the primary carer when they move from three days to four days a week under Labor, the Grattan Institute found this week.
A complex interaction of family tax benefits, childcare costs and subsidies combine to minimise the financial benefits of working an extra day by taxing primary carers at effective rates of up to 90 per cent. In some cases, primary carers actually pay for moving from three to four or five days of work each week.
It is understood modelling by KPMG, which declined to comment during the election, delivered a similar result to Grattan's- with the largest share of the benefits from the childcare package flowing to low to middle income households and reducing effective marginal tax rates by 10 per cent on an extra day's work for families earning up to $150,000 a year.
The Coalition's plan to eliminate the 32c and 37c tax brackets completely and implement a 30c tax rate over the decade would see the largest benefits flow to above-average income earners.
Ben Phillips and Professor Matt Gray at the Centre for Social Research and Methods at ANU measured the cumulative effect of all of Labor's tax policies across income taxes, franking credit changes, negative gearing, trusts and childcare.
They found that the measures would increase taxes by $30 billion per year over the decade but the changes would be "highly progressive".
"The vast majority of the impact is on the top 20 per cent of households by income," said Mr Phillips.
It found nearly all income earners in the top fifth of households would be losers under Labor's policies, while about halfof the middle fifth would be winners due to the redistribution of tax to measures such as childcare.
Labor leader Bill Shorten said on Friday the plan would lift working mums out of "the vicious cycle" of having their income eaten up by childcare when they returned to work and accused the government of favouring high-income earners over working parents.
"They say that we can't afford to give a $2000 subsidy per parent, per child," he said. "But when it comes to a tax deduction for the top end, oh, we've always got the money for that, haven't we."
Labor's plan does not make any changes for families earning over $174,000 a year, meaning those medium to high income earners would be marginally better off under the Coalition's tax cuts by 2022 and thousands of dollars better off by 2024.
KPMG modelling for The Sunday Age and The Sun-Herald in April revealed families earning more than Labor's threshold would see their tax disincentive rate fall by 3 per cent under the Coalition.
But many would still pay to work, paying an extra 6 per cent of their income to put their child in childcare on a fourth day and 16 per cent on a fifth day, as opposed to 19 per cent under Labor.
Prime Minister Scott Morrison said on Friday Labor would tax more and spend more.
"I reckon Australians have wised up to this idea that politicians come to you and say; 'You give me all your money and I'll solve all your problems'. That's what Bill Shorten is saying at this election," he said.
The Coalition announced plans on Saturday to spend $75 million helping up to 40,000 prepare themselves to return to work after taking time off to care for children or look after elderly relatives.
- SMH/The Age